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Business a bit nervy in April

PETER LLOYD: The latest figures show Australian businesses are finding the going tough. According to the NAB, confidence levels in the mining sector are now the lowest since the global financial crisis. The survey also points to rising unemployment.

But the NAB's latest snapshot of Australian business conditions has been met with some criticism.

And with more on that we've got finance reporter David Taylor.

DAVID TAYLOR: If the NAB's latest monthly business survey is anything to go by Australian businesses were all 'shook-up' in April.

Rob Brooker is the head of economics at the National Australia Bank.

ROB BROOKER: I think it's still a very tough environment out there.

DAVID TAYLOR: Business conditions came in at minus-six - that's not a great reading. Business confidence fell from two in March, to minus-two in April. It simply means the majority of businesses assess conditions as poor.

The worry list is growing: there are concerns about the US government's fiscal policies and debt; the eurozone remains in recession; and, there are fears China's economy will slow too much.

Businesses according to the NAB, were also anxious about the federal budget. And with less money to go around, the survey points to rising unemployment.

ROB BROOKER: We're getting a picture from our data, and I think from a few other sources around the place, that suggests that the labour market is quite weak at the present time.

DAVID TAYLOR: The weakest areas are in manufacturing and wholesale. But the survey has its critics.

Joseph Capurso is a currency strategist at the Commonwealth Bank. He says the economy is tracking along just fine.

JOSEPH CAPURSO: All we have to do is look at the unemployment rate - it's still only about 5.5 per cent. So, these business surveys can give a somewhat distorted picture at times. I think a…

DAVID TAYLOR: So you don't think the unemployment rate is edging up? Both the Reserve Bank and the NAB think it is.

JOSEPH CAPURSO: Well the unemployment rate is still very, very low. And both Reserve Bank and ourselves don't expect it to go up very much higher from those current very low rates.

During the GFC (global financial crisis) the unemployment rate didn't even get to 6 per cent. At the moment it's about 5.5 per cent. And it's unlikely to rise all the way up to 6. It's probably going to peak at about 5.7 per cent later in the year.

DAVID TAYLOR: Joseph Capurso says with numbers like that, Australia's economy still looks like a shining light on the world stage. That, along with relatively high interest rates, he says, will serve to keep the dollar higher for longer against the US dollar.

JOSEPH CAPURSO: The Aussie dollar may soften a little bit over the next few days, but I think over the weeks ahead the Aussie's going to be back at around the 103 mark.

DAVID TAYLOR: And why is that?

JOSEPH CAPURSO: Because the fundamentals of the Australian economy are still quite sound. The Reserve Bank of Australia may cut perhaps one more time over the next few months. And I think most importantly of all the US Federal Reserve are unlikely to be tightening monetary policy any time soon, and that should keep the US dollar weak.

DAVID TAYLOR: While that may keep the Australian dollar elevated in the long run, further interest rate cuts in the short term may soothe the particularly sore parts of the dollar-damaged economy.

See the Reserve Bank says it would like to see a pick-up in the residential construction market. But according to the NAB survey there doesn't appear to be any convincing evidence of that; hence the prospect of lower rates, which could lead to a lower dollar.

A whole slew of Chinese economic data out this afternoon also put some pressure on the local currency. The majority of readings - on anything from industrial production to retail sales - came in below what economists were expecting.

The data pushed the dollar back below parity with the US dollar. No doubt a welcome development for many parts of the economy.